Vice-President of the European Commission responsible for Enterprise and
Industry

Small business act for
Europe

Commission hearingBrussels 6th February
2008

Dear Ladies and Gentlemen,

I welcome the European SME-Community here in Brussels and first of all I wish
to thank you very much for the strong support that I have got from you since the
launch of a new SME policy exactly three years ago.

If I compare the situation of today with the situation that existed at the
beginning of 2005, I can proudly say that together we have made a huge
difference. When I told the European Parliament in February 2005 that SME policy
would be a top priority for the Barroso-Commission, people were somewhat
sceptical. There has never been a shortage of nice words for SMEs in Europe but
there was always a remarkable lack of real action.

What surprised me most was the fact that policy makers and leading economists
at a national and European level did not seem to have fully recognised the
decisive role of SMEs for the competitiveness of Europe in a globalized economy.
There are three reasons for this:

European manufacturers will continue to invest and produce outside Europe.
We will see further losses of jobs in these sectors and the only way to
compensate this is to exploit the potential of SMEs for growth and jobs.

The present financial turmoil and its significant impact on the economy as a
whole have shown clearly that a strong SME structure makes an economy less
vulnerable in a crisis like this. SMEs normally do not invest in highly complex
financial products and they normally stay where they are.

SMEs are close to the customers and therefore more flexible. As they are
very often family owned they have a high awareness of the needs of the society
and generally demonstrate a high level corporate social responsibility. What big
companies must develop, implement and monitor is for SMEs part of their
traditional culture. In other words: SMEs are the most important factor of
stability in an economic environment which is characterized by rapid and
permanent structural change.

To summarise in a nutshell:

Europe can in the long run only benefit from globalisation and we can in the
long run only maintain our European way of life including our high living
standards, if we fully recognize and improve the role of SMEs. Policy makers
everywhere in Europe should never forget that for the strong majority of
Europeans an SME is the employer.

We know very well where the strengths and the weaknesses of European SMEs
are. We have clearly identified, together with you, the areas where action is
needed. Let me mention just a few: societal recognition of entrepreneurship,
access to finance, transfer of business, ICT uptake and skills, reluctance to do
cross-border business, limited innovative capacities, limited R and
D-expenditure and , last but not least, difficulties in coping with
administrative burdens or, to be more precise, over-regulation.

We have addressed these problems with a lot of initiatives and actions. And
as I have already said: we made a difference. SME policy is now firmly anchored
in the European strategy for growth and jobs.

To fully unlock the business potential for SMEs is now a strategic objective
of the EU and all its member states. We see progress everywhere, certainly at
different speed and with mixed results but the process has started. What I have
seen as my most important personal task was the change in mind-set: to convince
policy-makers that SME policy has an extremely positive cost-benefit-ratio. To
convince economists and media that SME policy is a big issue even if the
individual SME on its own may not be so large. And I have tried to convince the
SMEs themselves that they must be more active and defend their interests in a
much stronger way.

I wanted to make these points very clear because we have to avoid a
misunderstanding: the project that we will discuss this afternoon, the Small
Business Act, is not the beginning of a new policy, it is a final step. In my
view it is the project that will crown our actions. We must not invent the wheel
this afternoon, it is already invented. With the SBA, we can exploit a very
favourable political environment and go the famous extra mile. We have chosen
the word 'act' which is not common in the EU legal language in order to
demonstrate the unique character of this initiative. It will be a combination of
legislative actions, political commitments and concrete practical steps. If we
are lucky we can fill the remaining gaps and solve the remaining problems for
SMEs in one sweep. This is ambitious, but we owe this high level of ambition to
al of you here today. Let me now explain in more details where we are and in
which direction we should go.

The fact that there are so many of you here shows that we share a belief in
the importance of this initiative: A Small Business Act for Europe.

In 2005, the Commission renewed its commitment to the Lisbon objectives of
growth and jobs including through the launch of a coherent, inclusive and
proactive Modern SME policy. Its mid-term review last October showed that
substantial progress has been made both at EU and national level. I think it is
no exaggeration to say that in a bit more than two years Europe’s 23
million SMEs have become the centre of interest not only at the EU level but
also in most Member States. It is a political breakthrough that the “Think
Small First” principle is now being integrated into Community and national
policies.

The Commission has made real efforts to cut red tape for SMEs and has
significantly increased the SME focus within major EU spending programmes for
the period 2007-2013. Member States have also substantially improved the
SMEs’ environment and progressed in their implementation of the 2006
Spring European Council conclusions.

In most Member States the many arms of government now extend a single hand to
business through one- stop- shops. The time needed to start a business has been
shortened, the cost lowered and bureaucratic procedures reduced. The average
cost for setting up a new company in the former EU-15 has fallen from 813 euros
in 2002 to 554 euros in 2007 and the time needed to register a company was
reduced from 24 days in 2002 to about 12 days today. Is that enough? Are we
there yet? “Not quite”!

DESPITE these significant improvements, I am convinced that more needs and
can be done. We have to build on this momentum and use this position of strength
to tackle the remaining long-term challenges for SMEs. That is why more emphasis
has been put on SMEs in the context of the next Lisbon cycle 2008/2010. As a
part of this commitment, we decided to propose a new far-reaching initiative: a
sort of Small Business Act for Europe.

Our action is threefold: First, we are looking at ALL remaining unnecessary
obstacles faced by SMEs, analysing the solutions offered by the market and by
public authorities in those areas. Second, we are looking at ALL opportunities
that we have to help SMEs to overcome their problems and to grow. And last but
not least, we are asking ourselves the very question: Have we, the EU, and its
Member States gone far enough in our action?

The result will necessarily be a combination of new, ambitious and resolute
actions and of common principles to guide action at EU and Member States level
to release the full potential of SMEs to create jobs and grow.

Let me be clear, SME policy remains largely the preserve of national
authorities – and rightly so – under the principle of subsidiarity.
That is why we also need a strong commitment on their side.

Ladies and Gentlemen,

Last week we launched a broad public consultation. Our online questionnaire
contains questions on key policy areas as we see them:

Regulating better for the benefit of SMEs.

We need your ideas, we need your experience, and we need your know-how. Now
is your chance to have a direct say on how we can regulate better for the
benefit of SMEs. Do you feel that SMEs are bombarded by regulations from all
directions and at different times of the year? We are therefore proposing common
commencement dates, date or dates when all regulatory changes take effect at the
same time of a year. This is only one of many measures that we are currently
reflecting on.

It's our common task to make sure that regulations do what they're designed
to do and clearly our "better regulation" strategy has already achieved a lot.
By taking part in the process and contributing ideas, from now until end of
March, you can give us further invaluable feedback that isn't available from any
other source.

Putting SMEs and entrepreneurship at the forefront of society.

A recent Eurobarometer survey asked our citizens how they perceived
entrepreneurship: If they were keen to set up their own company. The numbers are
self-explanatory!

49% of EU citizens have never thought of setting up a company – almost
double the US figure. These surveys and statistics give us valuable knowledge.
It is up to us now to use this knowledge and translate it into new
concrete measures, measures to encourage more Europeans to become
entrepreneurs.

We already have a promising tool in the pipeline: Erasmus for young
Entrepreneurs, where young entrepreneurs and potential young entrepreneurs
complete a traineeship in an SME in another country. This initiative ensures
that experience is exchanged and reinforced at European level. Do we need more
cross border mobility programs? Where do we have to go further?

Facilitating SMEs’ access to markets and in particular to the Single
Market.

Let me give you three examples of how we are already translating this
political vision of into concrete measures:

1. We are preparing a European private company statute which will allow SMEs
to benefit from a simplified common European legal form suited to their needs.
This will not only reduce costs for cross-border operations, but also increase
legal certainty.

2. SMEs are facing difficulties when participating in and benefiting from
European standardisation. How can we change that? We have many ideas in mind.
One could be to reduce the costs of certain standards for SMEs.

3. We want to give SMEs better access to public procurement: We have analysed
how public procurement markets, which account for about 16% of EU GDP, could be
better used to promote the growth and competitiveness of SMEs. The results of a
recent study show that 43% of the value of public procurement contracts above
the thresholds fixed by the EU Directives goes to SMEs. But we can do more. For
instance, the procedures and practices used in many tenders still disadvantage
SMEs over larger competitors. I remind you that we are not asking for quotas or
quantitative obligations. Instead, we will propose initiatives to cater for the
need for more transparency and information on public tenders.

Finally, in a global world, some SMEs may also want to tap opportunities
outside the Single Market and they need to be helped. What encourages me is that
we have these tools to help SMEs enter foreign markets – export
support programmes, Executive Training programmes, only to name two of them. Do
we have to extend them?

Supporting SMEs’ access to finance and innovation.

Access to finance for SMEs is only one key to fostering a more competitive
Europe. Giving SMEs more consideration in the State Aid field is another
one.

We are reflecting on possible measures to target State Aid better to the
needs of SMEs. But one thing must be clear as well: Member States have to make
much better use of the existing opportunities of the State Aid System.

SMEs’ innovative and creative capacity is not always fully exploited.
Many SMEs are not aware of the intellectual property system or the protection it
can provide for their inventions, brands, and designs. Insufficient information
on the relevance of intellectual property in day-to-day business, high costs
associated with obtaining and enforcing intellectual property rights,
perceptions that the intellectual property system is esoteric, too cumbersome
and time-consuming: These are among the reasons why many SMEs are sometimes slow
to protect their intellectual property.

Let me just give you one example of how the Commission is already tackling
this problem: In September 2006 we published a ten-point action plan designed to
foster innovation in Europe, in particular for SMEs. Do we need to go
further?

Let’s turn now to the environmental challenge into opportunities for
SMEs.

I feel that too many SME managers still leave energy efficiency at home,
instead of putting it to work FOR them. If you’re an SME,
you’re less likely to have resources to
dedicate to energy efficiency planning –
but it can be done and we want to help
you. We have to use environmental challenges as a platform to drive innovation,
in particular SMEs

In less than 24 hours we will celebrate the launch conference of our new
European business support network, the largest and most extensive business and
innovation support network in Europe, which became effective on the
1st of January. One idea could be to place environment and energy
efficiency experts within this new network. These experts could provide a type
of "help for self-help" education, how to comply with environmental legislation
AND reap the benefits.

Let me now come to the last point: Enhancing the implementation of EU SME
policy principles.

The European Charter for small enterprises, the Modern SME policy and various
Council conclusions established a number of principles. Take the “think
small first" principle as an example. These principles constitute the basis for
SME policies both at European and national level which are now fully anchored in
the Lisbon Strategy for Growth and Jobs. How can we better ensure the
implementation of these principles at national level?

These are only examples of areas where we need your views. I am well aware
that they are not exhaustive. I have not really talked about skills, to name but
one. But please remind us.

The Commission aims to adopt the proposal of the European Small Business Act
in June this year. I am very pleased that the current and the forthcoming
Presidency, Slovenia and France, have included this initiative in their agenda,
so we can count on swift negotiations in the Council, naturally in close
co-operation with the European Parliament.

However committed and motivated we - in the Commission - are to work in all
the above areas, we need YOUR co-operation. I am confident that by working
together, we can achieve our vision of having a vibrant SME sector, thriving
with globally competitive enterprises. Let us create, together, the best
possible Small Business Act for Europe for the benefit of all Europeans.